Deutsche Bank has issued a dire warning about the buy to let market in the UK, along with a broadside warning of a further slump in London’s housing landscape.
Weekend news outlets were brimming with stories of the bank’s latest warning that the tax changes introduced by Chancellor George Osborne against the private rental sector could deliver what it called a “major shock” to the wider housing market - with possible price falls of up to 20 per cent in the worst scenario.
Deutsche Bank says investors could expect returns to fall to as little as 0.0 or 0.5 per cent, and it warns that it is possible as many as 35 per cent of landlords in London could sell.
Oliver Reiff, co-author of the bank’s report on the UK housing market, is quoted in the Daily Mail as saying: “You also have to bear in mind that because of new mortgage regulations in the pipeline, many landlords may not be able to take out as much debt as before. This is likely to see fewer landlords buying properties, which will be a shock to the London market.”
Deutsche Bank is also warning about the forthcoming pipeline of homes at the large Earls Court development, which it warns could be the major casualty of a slump in London.
Reiff is quoted in the London Evening Standard as saying he expects prices for flats at Earls Court to fall by 20 per cent over the next three years, and for the scheme as a whole to lose as much as 65 per cent of its overall value.
Deutsche Bank is itself in financial trouble, contracting its global presence and shedding 35,000 jobs worldwide.
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another good reason for HMRC to reverse the decisions on Income Tax on Interest Relief.
The prime London market has been artificially high for decades, and is unrealistic, look to invest out of London, so its a case of ...oh dear....how sad...never mind...move on to sustainable long term markets
As a London agent I have to say that a lot of this smacks of absolute nonsense and, in my mind, shows a distinct lack of understanding of the true marketplace. The reality is, a lot of London Landlords have substantial equity in their properties with many buying from a financially secure position enabling them to buy cash or to have very low equity loans OR having established more equity with the London roperty values inclreasing at an average of 10% a year for the last 50+ years.
To comment that as much as 35% of London Landlords will sell up is ridiculous and I would love to see on what basis this has been substantiated.
The prime, top tier market in London is in trouble as this has been vastly over-supplied in recent years due to poor local planning strategies and THESE clients will see yields on these properties tumble due to a lack of demand and high running costs & above average voids. However, yet again, this is an area dominated by HNW individuals who have substantial equity and many buying at the top of the market have little or no interest in the yeild- it is all about the mid-long term capital appreciation.
Whilst I thin ther top tier market could easily see 20% come off- to make suppositions that a major development could lose 65% of its value is madness.
They should focus on their own issue rather than trying to destabilise other markets with unsubstantiated scaremongering.
The new tax regime, will hit, and hard. Its true that many landlords have equity built up in their properties BUT the maths cannot be denied. Not being able to claim the mortgage payments on a BTL as a legitimate business cost must lead to some landlords selling. Each will have their own reasons. Were prices to drop by 20% and rents to stay the same, new money would look to the BTL market. Either way BTL will not be going away in the long or short term. Mr Osborne knows this and like all chancellors, he know an easy target when he sees one.
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